Value Stock Investing seeks to provide undervalued stocks ideas in US & Singapore.
Price is what you pay. Value is what you get.
Rule No.1: Never lose money. Rule No.2: Never forget rule No.1. - Warren Buffett
Please bear in mind that ALL ideas, opinions, and/or forecasts are for informational or entertainment value ONLY and should NOT be construed as a recommendation to invest, trade, or speculate in the stock market.

Sunday, May 19, 2013

Benjamin Graham is the father of investing and his way of value investing was to search for net-net stocks where he will construct a basket of stocks as his portfolio. His method of value investing is still being widely practiced by value investors such as Seth Klarman, Third Avenue Management etc. Following my blog post a month ago on Singapore stocks via a report by CLSA, I would like to feature a similar report by CLSA on Malaysia stocks.

Ben Graham stated 10 rules for stock selection, the first five measuring “reward” (price relative to earnings) and the second five measuring “risk” financial soundness and earnings stability). Ben Graham's 10 criteria are:

Is PE ratio less than half the reciprocal of the 10yr government bond yield?

Is the PE ratio less than 40% of the 5yr average?

Is the dividend yield at least 2/3rd of the 10yr government bond yield?

Is the share price below 2/3rd of tangible book value per share (BVPS)?

Is the share price less than 2/3rd of net current assets per share?

Is the net gearing ratio (net debt/equity) less than 100%?

Is the current ratio (current assets / current liabilities) greater than 2x?

Sunday, May 12, 2013

This post is on SG stocks investing strategy recommended by UOB Kay Hian which might provide some investment ideas for those of you reading the post

For 2013's remainder, UOB KayHian tips being selective
on blue-chips and seeking alpha in undervalued mid-caps. With the top-15 STI
stocks at an only 3.3% average discount to long-term P/B means, stocks with
capitalisations below $1.5 billion may offer deeper value, it says, with its
top-five segment picks Silverlake (5CP.SG), Kreuz(5RK.SG), Triyards (RC5.SG), Ying Li (5DM.SG)
and Sino Grandness (JS5.SG).

Its large-cap buy list includes DBS (D05.SG), M1 (B2F.SG), Keppel (BN4.SG), OUE(LJ3.SG) and SIA Engineering (S59.SG). Singapore's overall market valuation
is inexpensive at 15.1x 2013 P/E, a 7.5% discount to long-term means, it says;
"The next one to two quarters could see a mixed performance given
uninspiring macro data points such as a weak 1Q13 GDP and uncertainties in the
eurozone. Nevertheless, we see the recovery picking up momentum in 2H13 and for
the market to head towards our 3500 year-end (STI) target."

It tips several potential themes for outperformance,
including rotation within S-REITs to office and hospitality segments, strong
cash generators such as SIA Engineering,Super Group (S10.SG)
and Silverlake, deep-value stocks with potential catalysts, such as Ying Li
and Guocoleisure (B16.SG), and mid-cap consumer and oil-services
companies.

I first wrote about Goodpack as an undervalued stock when I started the blog 3 years ago. Three years on, I still feel that Goodpack is a good stock and is one of the undervalued stocks listed on the SGX. The following blog post is a brokerage report on Goodpack issued by DBS Vickers on 19th March.In the report, they had recommended investing in Goodpack. Below is the excerpt from the report on the investment thesis on Goodpack:

Shifting to faster gear.Goodpack
should see stronger growth from 4QFY13 (FYE June) with new contracts from the
Russian market and Lanxess’ new plant in Singapore. Momentum should continue
into FY14 with the pickup in rubber trade volume on the back of pent up demand
in the replacement tyre market, which constitutes c.53% of total rubber demand,
following 20 months of weakness. In addition, cost savings from the global
tender exercise will help to improve net margins by an estimated 1ppt. We
expect these to fuel FY14/15F net profit growth of 25%/16%.

Gaining traction in autoparts segment. Goodpack has been knocking hard on the doors of GM’s OEMs and
suppliers as well as a few other automakers. Hundreds of samples have been sent
for testing and we understand that the company is making progress with a few
suppliers in Europe. Future announcements of autopart contracts should be a
share price catalyst.

Friday, May 3, 2013

Coach is one of the most recognized brands in the luxury
goods industry. It is a leading marketer of fine accessories for women and men,
including handbags, women’s and man’s leatherwear, footwear, travel bags,
watches, fragrances and related accessories. Coach was established in 1941 and
sold to Sara Lee for $30 million in 1985. Sara Lee Corporation then sold 19.5%
of the shares in an IPO in October 2000. Since listing of the company in New
York Stock Exchange, Coach has grown to be the number one brand within the U.S
premium handbag and accessories market.

Business Model

Coach’s
merchandise is sold through Coach stores, factory outlets, select department
and specialty stores, duty free locations in airports and online via their
website, coach.com. It groups its business into 2 segments, namely
Direct-to-Consumer and Indirect. Over 85% of the company’s sales are generated
by Direct-to-Consumer segment, with the majority of the sales coming from
selling handbags and accessories.

Coach markets itself as selling “accessible luxury” and its
pricing strategy for a handbag ranges from $298 - $1000 which means that its
product reaches a larger consumer demographic than other high-priced
competitors such as Louis Vuitton, Prada which focus on the very wealthy. The strategy of targeting the higher and
upper middle income shoppers differentiates Coach from its competitors and also
helps to establish it as the poster child of tapping into this global trend
of consumers wanting to trade up in the quality and style of what they buy.

As Warren Buffett says “In business, I am looking for
economic castle protected by moats”, Coach has a narrow moat and competitive
advantage. It has a strong brand presence in the luxury market and this is not
easily eroded by other competitors. New competitors into the luxury brand
industry will have to spend a large amount of money and resource to build up
brand awareness and image. There is also consumer loyalty as Coach has been
delivering high quality products that is simple, reliable and perceived value
for the money.

To further grow the business, Coach has outlined its
strategy of (i) raising its brand awareness and market share in
under-penetrated Asian market with China being the top targeted market (ii)
growing its woman’s business in North America and European market (iii)
increasing its men’s business in North America and Asia (iv) maximizing
e-commerce sales

Why is Coach a screaming buy?

Coach is a great company to invest in for a multitude of
reasons. Coach has executed its strategy successfully over the past decade. Its
revenue has grown progressively every year at a compounded growth rate of 21%.
This is a mean feat considering that it is in a highly competitive sector. It
has also showed that it is able to grow through strong or weak economies as
evident by the increase in sales in 2009. The ability to keep increasing
revenue shows the strength of its pricing strategy.

To find out why Coach is a undervalued stock that could turn out to be a multibagger, click here